While the most recent report from the National Federation of Independent Business shows that the small business optimism index has risen nationally, NFIB California state director Jack Kabateck warns how steps by the legislature could impact small businesses in California.
“This is great news for the small businesses of America that have been starved of it ever since the pandemic,” reads a statement from Kabateck. “Nationally, things are improving. The outcome of some big ballot initiatives last month will help locally, but the people might have to assert themselves again If our Legislature insists on continuing with its silly goal of ‘Trump-proofing’ the state. Maybe it’s time to California-proof the small business economy against its own Legislature.”
Gov. Gavin Newsom convened a special session following election night to “protect California values,” something that Kabateck believes is “squandering” $35 million of taxpayer dollars on “speculation and paranoid anticipation.”
The optimism index rose by eight points nationally, reaching 101.7 in November – the highest reading since June 2021. This comes after 34 months of remaining below the 50-year average of 98.
“The election results signal a major shift in economic policy, leading to a surge in optimism among small business owners,” reads a statement from NFIB Chief Economist Bill Dunkelberg. “Main Street also became more certain about future business conditions following the election, breaking a nearly three-year streak of record high uncertainty. Owners are particularly hopeful for tax and regulation policies that favor strong economic growth as well as relief from inflationary pressures. In addition, small business owners are eager to expand their operations.”
Optimism among small business owners has risen considerably since the election with 36% expecting the economy to improve – the highest since June 2020.
This is notable considering that 20% of small business owners reported inflation as their most important problem in operating their business – higher than input and labor costs – and 36% reported job openings they could not fill. Additionally, 87% of the owners hiring or trying in November reported few to no qualified applicants.
“Reports of labor quality as the single most important problem for business fell one point from October to 19%,” reads the report. “Labor costs reported as the single most important problem for business owners rose three points to 11%, only two points below the highest reading of 13% reached in December 2021. Among owners reporting lower profits, 32% blamed weaker sales, 18% blamed the rise in the cost of materials, 13% cited labor costs, and 9% cited lower selling prices. For owners reporting higher profits, 53% credited sales volumes, 21% cited usual seasonal change, and 13% cited higher selling prices.”
Kabateck noted that in order for California small business owners to thrive, specific legislation is needed, and some was passed, in November.
“The one measure that will truly give small businesses owners and communities greater hope is the overwhelming voter approval of Proposition 36,” Kabateck said. “This was the measure that was created to help the problems that were created through Proposition 47 which made it a lot easier for shoplifters and other property criminals to thumb their nose at the law. It [Prop. 36] will hold the criminals accountable, but also provide diversion programs to give many an opportunity and a pathway at rehabilitation.”
Kabateck said he is “cautiously optimistic” about the future of small businesses, but “small business owners, families and communities are sick of over-regulation, higher taxes, more frivolous lawsuits that do not pave the way to success, but instead block the way to progress in our communities,” and he believes the California legislature will need to honor those wishes in order for small businesses to succeed.
